FinCEN Issues Advisory on the Financial Action Task Force Updated List of Jurisdictions with AML/CFT Deficiencies

By: Terri Luttrell, CAMS-Audit

With all that AML professionals must do each day, sometimes important advisories and updates get overlooked.

On July 12, 2019 FinCEN issued an advisory referencing the June 21, 2019 Financial Action Task Force (FATF) publication which updated its list of jurisdictions with anti-money laundering and combatting the financing of terrorism (AML/CFT) deficiencies. The FATF is charged with monitoring jurisdictions for compliance to their global AML/CTF standards, and reporting countries with strategic deficiencies. Financial institutions (FIs) should consider these updates and changes when reviewing their overall BSA/AML programs and risk-based policies, procedures and practices.

What changed from the list? What, if any, countries should your financial institution add to your list of areas of concern?

Serbia, previously included on the FATF deficiency list, has been removed. According to the FATF, Serbia has made significant progress in improving their AML/CFT program and has established the legal and regulatory framework to meet the commitments regarding the deficiencies that the FATF previously identified. Serbia will continue to work toward further improvements.

Financial institutions should still conduct their own analysis of countries that have been removed from the list to determine if they are no longer areas of concern for the risk profile of each institution. Political unrest, human rights violations, and/or other financial crimes may be reasons to keep a jurisdiction on your internal list for monitoring even if the FATF determined AML/CFT progress has been made.

Panama has been added to the list and will undergo monitoring by FATF based on the country’s lack of effective implementation of its AML/CFT framework. Panama made a high-level political commitment to work with FATF to strengthen the effectiveness of its AML/CFT regime.

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What hasn’t changed in the recent update? The call for countermeasures or enhanced due diligence for the following jurisdictions remains strong:

1) Democratic People's Republic of Korea (DPRK) is subject to counter-measures due to significant deficiencies in its anti-money laundering and combating terrorism regime and the serious threats they pose to the integrity of the international financial system.

2) Iran is subject to enhanced due diligence measures proportionate to the risks arising from the jurisdiction. While the FATF acknowledges progress with Iran passing the Anti-Money Laundering Act, the action plan remains outstanding. With this outstanding, the FATF remains concerned with terrorist financing in particular and called for enhanced due diligence efforts.

Since these are not new designations and are also on the OFAC list with robust sanctions programs, these jurisdictions should already be on each institution’s higher risk radar.

FinCEN guidance gives a strong reminder of USA PATRIOT ACT Section 312 obligations. The regulations require that covered financial institutions ensure their enhanced due diligence programs include steps to:

  • Conduct enhanced scrutiny of correspondent accounts to guard against money laundering and to identify and report any suspicious transactions in accordance with applicable law and regulation;
  • Determine whether the foreign bank for which the correspondent account is established in turn maintains correspondent accounts for other foreign banks. If so, take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign banks;
  • Determine the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest.

FATF generally updates their list of non-compliant jurisdictions on a quarterly basis. Financial institutions should review these updates and adjust their AML programs accordingly. It is important to remember that if a jurisdiction is removed from this list, each institution should still review their risk profile to determine if it continues to be an area of concern for them.

About the Author

Terri Luttrell, CAMS-Audit

Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. She has successfully worked with institutions in developing BSA/OFAC programs, optimizing various automated solutions, and streamlining processes while ensuring all regulatory requirements are met. As the Senior Manager of Strategy and Engagement at Abrigo, Terri provides insights that contribute and support long-term banking strategies based on analysis of market and industry trends, competitor developments, and financial and regulatory technology changes. She is an audit-certified anti-money laundering specialist and a board member of the Central Texas chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS). Terri earned her bachelor’s degree in business administration, specializing in business and finance, from the University of North Texas.

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